To start with what is clearer: on Monday (15 June), the Prime Minister met the presidents of the European institutions for the long-planned stock take of progress on the negotiations on the future UK-EU relationship.
This had originally been timed to allow for a decision to be taken before the end-June deadline on extending the current transition period, if more time was needed to complete the negotiations.
But, despite the negotiations apparently making little progress and calls from some UK sectors for an extension (such as the British International Freight Association), the UK government has confirmed its previous statements that there will be no extension.
The transition period will end on 31 December 2020.
Whether or not a trade deal is agreed, this means that from 1 January 2021, customs and other border formalities will be required for goods moving between the UK and the EU. The only exception will be goods moving between the Republic of Ireland and Northern Ireland.
Instead, there will need to be checks on goods from GB to Northern Ireland, but what form these will take still remains to be seen.
The UK government has now made clear that it will soften the introduction of full customs requirements for UK importers, in three stages:
• From 1 January 2021, traders importing standard goods will have to complete only basic customs documentation (e.g. keeping sufficient records) and can defer payment of any tariffs for up to six months, by when a full customs declaration must be made. But there will be checks on goods like alcohol and tobacco, and on ‘high risk’ live animals and plants, and businesses will need to consider how they account for the VAT on imported goods;
• From April 2021, all products of animal origin and all regulated plants and plant products will require pre-notification and the relevant health documentation; and
• From 1 July 2021, full customs declarations and tariff payments will be required at the point of importation for all goods, including full Safety and Security declarations. Checks for animals, plants and their products will take place at GB Border Control Posts (to be built at new inland sites).
However, this gradual approach will apply only to goods coming into the UK from the EU. Goods going the other way are likely to meet full customs and regulatory checks at the EU border. And the requirements on the UK side are only postponed, not removed: businesses must still prepare to fulfil the requirements, anticipated to be an extra 200 million customs declarations a year.
This will happen whether or not a trade deal is agreed. With the confirmation that there will be no extension, it will now happen on 1 January 2021. All businesses trading between the UK and the EU need to be thoroughly prepared for it.
Moving on to the ‘obscure’ side of the equation: it is still no clearer whether or not an agreement on the UK-EU’s future relationship – including whether or not there will be tariffs on goods – will be concluded and brought into force by 1 January 2021.
Despite COVID-19, both sides proudly point to the fact that four rounds of negotiations have been completed and that draft legal texts have been exchanged. But that is as far as the process has gone, with no serious signs of any readiness to compromise by either side on the key issues, notably fisheries, a ‘level playing field’ to ensure fair competition, and how the agreement will be enforced.
On 15 June, both sides agreed – predictably – to intensify the talks. A deal would make sense for both sides since a ‘No Deal’ cliff edge would damage the economies of both, on top of the damage wrought by the COVID-19 pandemic.
But negotiations need a deadline to bring both sides to make the compromises necessary. The new deadline, according to the EU, is 31 October – the latest date for a deal to be ratified and brought into force by 1 January 2021.
Until that looms closer, expect the current arguments and stalemate to drag on, at least in public (but hope that, behind the scenes, officials are starting to thrash out the inevitably complex and messy details of potential compromises).
Even that deadline may come and go, and the talks yet further ‘intensified’ up to the last minute, whenever that may be before midnight on 31 December, with potentially an ‘implementation period’ for a few months into 2021 to allow time for a deal to be brought into force (which will of course not be an extension to the transition period, although it might look suspiciously like it).
But for now this remains highly speculative. What we can conclude is that:
(a) businesses must prepare for inevitable customs requirements from 1 January;
(b) they would be well advised to continue to prepare for a No Deal cliff edge on 1 January; and
(c) they will not know for sure whether this will in fact occur for several months yet.
To discuss these implications for your business, please contact your usual Fieldfisher advisor or either Richard Tauwhare or Andrew Hood.
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